Investec predicts further corporate activity in funds management sector

Hein Vogel

Fund managers are looking at alternative options to achieve scale in what is becoming an increasingly competitive market.

The merging of fund managers to boost funds under management, such as the recent Access Capital and Challenger deal to form boutique infrastructure manager Whitehelm Capital, is likely to be an increasing industry trend according to Investec Bank (Australia) Limited (Investec).

Whilst international companies continue to look for opportunities to enter the Australian market, domestic players are starting to pro-actively seek out scale opportunities – either by partnering with an “aggregator” or an industry peer.  In addition to advising on the Access Capital transaction, Investec has also been working with an Australian hedge fund to review its strategic options.

Hein Vogel, Executive Director, Corporate Advisory at Investec said following a spate of transactions in the wealth management space, fund managers are now feeling the margin pressure as part of the wealth management value chain and are actively looking at their options.

“The funds management space is moving at a rapid rate and continues to grow off the back of the legislated superannuation system. However, as the industry matures, managers are under increasing pressure to reduce fees to win large mandates, which requires a greater level of funds under management to make sure that the business is sustainable,” Mr Vogel said.

There has also been interest from overseas players looking for opportunities to buy firms as a means of expanding into this market.

“The proliferation of multi-boutique models also means a steady stream of buyers are looking for the right businesses to provide seed capital and support services to.  In the short term, alternative asset classes like infrastructure and fixed income area receiving the most attention.

“Financial services including wealth and asset management is a core area of focus for Investec and we are excited to see activity in the sector including the completion of the merger which has resulted in Whitehelm Capital,” he said.